9:45 am

Tue February 25, 2014

Who's Paying For Detroit's Recovery Plan?

This is TELL ME MORE from NPR News. I'm Michel Martin. We've been following circumstances in Detroit for some time now as the city tries to figure out how to deal with its massive and mounting financial problems. Now there is a new plan to restructure the city's 18 billion dollars of debt, and this plan may have a lot to do with shaping the Detroit of the future. Detroit Free Press columnist Rochelle Riley is back with us to tell us more. Welcome back, Rochelle. Thanks so much for joining us once again.

ROCHELLE RILEY: Thank you for having me.

MARTIN: So give us the top lines - this plan, just to remind everybody, was proposed by the emergency manager, Kevyn Orr. So what are the key pillars of it?

RILEY: Let's start with the biggest problems so that people will understand what's going on - there aren't enough property taxes coming in for revenues, the pension funds are not funded at the point where they can actually pay what they have to pay people. So what he did was file a plan of adjustment, which provides a detailed summary of all of the debt - what the creditors are owed and what the city thinks they're going to give them.

And then he did a disclosure statement that shows how they're going to restructure and come out of this as sort of a picture of the city government's future. Now the highlights - and the biggest highlight of course is that there's going to be a horrible pension cut for employees in general and for employees who are with the police and fire departments - a 34 percent cut to general city retirees and 10 percent to police and fire. This is something that emergency manager Kevyn Orr says is fair and that people are very, very upset about.

MARTIN: So these are people who are already retired?

RILEY: They're retired. These are the, you know, almost 20,000 people who, in some cases, are too old to work or do anything else and who have been getting their pensions for a while. He has said several times there are going to be different levels of cuts, but he hasn't figured any of that out right now. So he's sort of going with this is the median - 34 percent and 10 percent.

MARTIN: What about the services that the city still needs to deliver right now like police and fire services? I mean, we're hearing that these services have been kind of severely compromised over the course of this thing. Is there any plan to deal with that?

RILEY: Yes. As a part of this, it details quite specifically how he wants to spend different things to fix the city so that the city can bring in more people or taxpayers and start to bring in revenue again. The worst thing about the city is that it hasn't taken in this little amount of revenue since 1963 from property taxes. So there's like a half a billion dollars from blight removal to try and get rid of the more than 70,000 pieces of property that are barely property, stabilizing property values, allowing for more efficient city services, turning on the lights - a lot of the city is dark every night - improving health and safety, lots of changes to the police and fire departments and increasing land development so that, you know, you can change what the city looks like and help improve the city's national perception.

MARTIN: And speaking of national perception, I mean, one of the stories that I think has gotten a lot of national attention is this whole question of the works that are currently housed in the Detroit Institute of Arts, the DIA. I mean, this is considered a national treasure. It's certainly a draw for people to see works that they cannot see anywhere else. And there was this big battle over whether those works would have to be sold in order to provide some revenue. What happened there?

RILEY: Well, that's a battle that will be ongoing. What they've got is a - what they're calling the grand bargain or the great deal. And $350 million from the state, another, you know, maybe $400 to $500 million from donors, including $100 million from the DIA itself as a part of a deal that would put money into the pension fund, make the DIA a separate entity not connected to the city so that it would not have to go through this again.

This has to go through the legislature, and, quite frankly, there are people who live in Grand Rapids or Grand Blanc who are like, why are we going to spend $350 million to save an art museum in Detroit? It's a nationally renowned museum. People from across the state go to it. And there's such support for it that they passed a millage so that people in three counties put tax dollars into creating a millage so that it would be able to continue to do some of the things it would do. And they would get to go into the museum for free, except for special exhibits they found out later.

MARTIN: There's so many issues here that people feel so strongly about. I mean, certainly people feel very strongly about the Detroit Institute of Arts. People, obviously, feel very strongly about their pensions, particularly people who are no longer of an age where they feel they can work or they can work. What's been the response to this?

RILEY: People are outraged about all of it. I mean, the art lovers are outraged. There's still a possibility that the DIA is not safe because this deal is not a done deal yet. I spoke with a woman this week who has to move into her daughter's house. She's going to lose her house, move into her daughter's house because she lost her health insurance and had to use the Affordable Care Act Exchange. And she's going to be paying $450 a month for something that was a quarter of that before. And it's really going to change people's lives. I think it's one of those things where folks are trying to figure out which side of things they're on, you know - art versus pensions, doing this bankruptcy at all versus not doing it. There are still legal challenges to the bankruptcy itself and whether Detroit had to do this.

MARTIN: Is anyone in support of this plan other than the emergency manager who - who was tasked with presenting it. And it was going to be difficult no matter what. Is there anybody supporting the plan? Is there anybody saying this is the best we can do, this is a good idea, this is the best way forward?

RILEY: They just filed these two statements, the plan and disclosure statement, on Friday. And people are still going through it to figure out what else is in there and how bad it is. But the thing that you have to remember is that revenue in Detroit fell 40 percent from 1962 to 2012. We're talking about, literally, you know - the way you determine a city's tax base and the ability to pay its bills, you know, the total assessed value of Detroit property fell 77 percent over the past 50 years.

There was something that had to be done. So you've got business leaders who would like a clean slate. So they're saying let's do what it takes to get this done. You've got the state who's saying that because everything that's not taken care of the state is going to pay for, whether it's in human services dollars or tax dollars or welfare. I think that there are some people who want this done, want it done quickly and want to get back to a new business as usual. Unfortunately, if you're going to push as much as a third of your population into poverty, you're going to have another bill that comes due on the other side.

MARTIN: Finally, before we let you go - and this is obviously very significant news, and we don't want to give it so short. So thank you for trying to encapsulate what is clearly not just a difficult financial situation but a very difficult emotional situation, you know...

RILEY: Absolutely.

MARTIN: ...For the entire city. We do want to mention that Representative John Dingell is retiring, you know, kind of a major figure both in Michigan, in Detroit and in the Capitol - the longest-serving member of the House, I believe, at this point. How is that news being received?

RILEY: You know, I haven't talked to a lot of people about that yet, but the people I have talked to have been a little surprised. They thought that he would serve until his service on earth was over. So they were a little surprised. He's of sound mind. I have had many conversations with him. He's literally one of the best people I know. And I was a little surprised, too. I thought he would run one more time because he wasn't running for the record, he was running for the service. And he still, you know, felt like there were things that he needed to do. So I guess he changed his mind.

MARTIN: Rochelle Riley is a columnist for the Detroit Free Press. She was kind enough to join us from Michigan Radio in Ann Arbor, Michigan. Rochelle Riley, thanks so much for speaking with us once again.